• Kyodo, Bloomberg

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Nippon Life Insurance Co. is considering buying its smaller competitor, Mitsui Life Insurance Co., in an attempt to regain the crown as Japan’s top premium revenue earner through what would be the first major shake-up of the country’s insurance sector in roughly 11 years, sources said Wednesday.

Mitsui Life has broadly agreed to the terms of the envisaged acquisition, in which Nippon Life, also known as Nissay, is set to offer up to ¥400 billion ($3.34 billion) to acquire Mitsui Life shares from major stockholders, including Sumitomo Mitsui Banking Corp., according to the sources.

Buying Mitsui Life would contrast with a wave of multibillion-dollar takeovers abroad by Japanese insurers as the country’s aging population limits growth prospects at home.

Nissay was outranked in policy premium incomes by Dai-ichi Life Insurance Co. in the business year that ended in March for the first time in postwar Japan. Nissay earned ¥5.33 trillion in premiums and reinsurance revenue, trailing behind Dai-ichi Life’s ¥5.43 trillion.

Nissay is planning a new brand of service to step up policy sales at counters set up at commercial banks. If bought by Nissay, Mitsui Life could play a main role in this service.

A mutual company owned by policyholders, Nissay is set to run Mitsui Life as a subsidiary after the planned acquisition, which would be the first major reorganization in Japan’s insurance market since the 2004 creation of Meiji Yasuda Life Insurance Co. through the merger of Meiji Life Insurance Co. and Yasuda Mutual Life Insurance Co.

Mitsui Life’s existing policy contracts will likely be passed on to Nissay, the sources said.

Japan’s life insurance market is anticipated to shrink along with its declining population, which stems from a falling birthrate and graying society.

Japanese life insurers have been expanding their presence abroad while facing the challenge of increasing their market shares considered essential in shoring up the bottom line. A wave of reorganization, similar to Nissay’s anticipated purchase of Mitsui Life, may strike other players in the market.

Nissay is eying investing up to ¥1.5 trillion in mergers and acquisitions of other insurers in and out of Japan in a plan for fiscal 2015-2017. Mitsui Life is believed to be one of the targets under the plan.

Sumitomo Life Insurance Co. agreed this month to purchase Symetra Financial Corp. for about ¥452 billion. Tokio Marine Holdings Inc. agreed in June to acquire HCC Insurance Holdings Inc. for about ¥897 billion, and Dai-ichi Life struck a deal last year to buy Protective Life Corp. for more than ¥597 billion.

Osaka-based Nippon Life has been taking minority stakes in companies such as AIA Group Ltd. in Hong Kong, Post Advisory Group in the U.S., Indonesia’s Sequis Life and Reliance Group in India.

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